The higher the exchange rate today, the
A) smaller is the expected profit from buying U.S. dollars today and holding them.
B) greater is the expected profit from buying U.S. dollars today and holding them.
C) smaller is the expected profit from buying foreign currency today and holding it.
D) greater the quantity of U.S. dollars demanded in the foreign exchange market today.

Question

Quizplus · Accepted Answer

When the exchange rate is high, it implies that the U.S. dollar is expensive relative to other currencies, reducing the potential profit from buying dollars now and selling them later if the rate decreases.

The Higher the Exchange Rate Today, the